Small business is commonly referred to as the engine that drives the U.S. economy, so it was of little surprise that the Great Recession put so many mom and pop shops in the red. Yet, this year has brought renewed optimism, according to a survey given to 450 small-business owners by the National Small Business Association.
Small businesses reported the largest gains in hiring and revenues in two years. An overall revenue bump of 36 percent in December is up from 26 percent in July—the largest increase since July 2008. Also for the first time since July 2008, 54 percent of small businesses surveyed are projecting an increase in revenues.
Additionally, many small businesses have stopped hemorrhaging jobs. The NSBA reported 15 percent of owners hired new employees in the last 12 months, up from 11 percent in July.
Small businesses are a crucial source of jobs, employing about half of all workers, according to the Bureau of Labor Statistics. They shed a disproportionately large share of workers during the recession partly because it was harder to get loans. Credit markets have thawed slightly since, with 64 percent of small businesses reporting they’ve been able to obtain adequate financing for their business -- up from 59 percent six months ago.
“Although the overall tone in the small-business community has improved in the last six months, there still are many challenges ahead,” said Todd McCracken NSBA president and CEO. “Economic uncertainty, health insurance costs and lack of available capital continue to hold small businesses back.”
While the report did not specify why small businesses were seeing improvements, the NSBA points to other positive indicators on the overall economy and consumers spending.
On Wednesday, the ADP national employment report said the private sector added 187,000 jobs in December, down from a revised 247,000 in November. Although the report suggested solid growth heading into the New Year, the numbers were disappointing. And with 65 percent of small-business owners anticipating a flat economy this year, hiring new employees is not likely to happen any time soon.
Still, private sector analysts suggest that it will be four years before the unemployment rate, currently at 9.4 percent recedes below 6 percent.
“The sentiment I’m getting right now is that small business owners are frightened,” Rep. Scott Tipton, R-Colo., told The Fiscal Times. “They don’t see light at the end of the tunnel. They are very concerned.” Tipton, who sits on the House Committee on Small Business, said top concerns for small businesses were government regulations, taxation policies and frozen capital markets along with the uncertainty over the impact of the health care law.
Last September, President Obama signed into law the Small Business Jobs Act, which included plenty of tax breaks and a $30 billion small business lending fund aimed at enhancing small-business lending and access to credit.
A new report by the National Federation of Independent Business found small business loan approvals up in 2010 over 2009. Meanwhile demand decreased to 48 percent in 2010 from 55 percent in 2009, disproving the myth that access to credit is the number one obstacle holding back small businesses. Sales remain the biggest problem for small businesses today, said William Dennis, senior research fellow with the NFIB. “Things are looking a little better than they have for most of the year,” he said. “The issue still is we are at recession levels.”
The year-end NSBA report is a mild improvement from the bleak outlook of the 2010 mid-year survey. It comes amid a shift from the White House to create a more pro-business agenda, which has included the appointment of several business-friendly chiefs of staff. President Obama has also vowed to overhaul rules executed by regulators that place “unreasonable burdens on business.” On Monday, the White House announced a string of new initiatives, collectively called the ‘Startup America’ program, designed to spur entrepreneurship and create jobs. Republicans were quick to label the program, chaired by former America Online CEO Steve Case, as a ‘gimmick’ and the small business community dismissed it saying it was too focused on start-ups instead of existing businesses.
“It’s trying to put out a forest fire with a hose,” said Dennis. “It’s not serious.”
Survey Shows Little Desire Among Small Business for New Loans (Wall Street Journal)
Banks Ease Credit to Big Companies, But Leave Out Small Business (Huffington Post)
Small Business Borrowing Jumps in December (Reuters)